Investment facilitation means the setting up of a more transparent, efficient and investment-friendly business climate by making it easier for domestic and foreign investors to invest, conduct their day-to-day business and expand their existing investments.
- The focus on investment facilitation comes with the recognition that in today’s integrated global economy, expanding investment flows, like trade flows, depend on simplifying, speeding up and coordinating processes.
- Indeed, in many cases, the bottlenecks, inefficiencies and uncertainties that investment facilitation seeks to address arise from unnecessary red tape, bureaucratic overlap or out-of-date procedures which can become costly impediments to investment.
What it aims to achieve
- The purpose of the investment facilitation agreement is to create legally binding provisions aimed at facilitating investment flows.
- The legal obligations (among other things) would require States to augment regulatory transparency and predictability of investment measures, streamline and speed up administrative procedures, and enhance international cooperation, information-sharing, and exchange of best practices to bolster foreign investment inflows.
- This agreement will be very different from investment protection treaties such as bilateral investment treaties (BITs) that impose substantive protection standards on host States and confer enforceable rights on foreign investors.
Implications for India
- India believes that negotiations on investment facilitation are a camouflage to bring in contentious issues such as market access and investment protection within the ambit of the WTO. After being sued by more than 20 foreign investors under BITs, and losing high-profile cases against corporations such as Vodafone and Cairn Energy, India is wary on investment protection under international law.
- India’s apprehensions also stem from WTO’s checkered past on investment. After the establishment of the WTO in 1995, developed countries and blocs pushed for a multilateral agreement on investment focusing on market access and investment protection. However, due to persistent opposition from developing countries, including India, investment was finally dropped from the WTO’s agenda in 2004.
- India, as part of its domestic economic reforms to boost foreign investment, has adopted several measures aimed at facilitating foreign investment. For instance, the commerce ministry recently launched a foreign investment facilitation portal, which will act as a single point online interface between the government and foreign investors. This single-window clearance system is expected to iron out the administrative bottlenecks that foreign investors face while dealing with different government departments and ministries.
- Likewise, India has strengthened regulatory transparency by making available all the policies and regulations on the portal.
- Given this, the investment facilitation agreement is a great opportunity for India to lock in these unilateral reforms by agreeing to binding norms at the WTO. This will enable India to demonstrably walk the talk on economic reforms, ensuring no backtracking and avoiding costly policy upheavals. It will also signal a stronger commitment to foreign investors towards attracting foreign investment, which is critical to attaining the goal of becoming a $5-trillion economy.
- The WTO investment facilitation agreement should not unduly curtail the policy space of developing countries.
- The WTO investment facilitation agreement should not impose too onerous binding obligations, which developing countries would find difficult to meet. Instead, the agreement should contain provisions on providing technical assistance to developing countries such as India to fulfil obligations under the agreement.
India would do well to actively take part in these negotiations and try to shape the investment facilitation agreement in a manner that reflects its concerns. India can also consider using the investment facilitation agreement as a bargaining chip to obtain a favourable deal on other issues in the WTO, notably agriculture.
How to structure:
- Give an intro about WTO’s investment facilitation agreement
- Explain in detail about it
- Say its relevance in world trade
- Also mention how it affects India